Yes, the service is supposed to be running only when MM is not running, because it actually shares the same data and runs MediaMonkey.exe.
So MM stops the service when starting and starts the service when closing.

So it seems that there is a conflict when MM tries to start the service during install the service (when both MM and the service are running).
I will try the MediaMonkeyRemote to see if I can simulate the conflict.

What exactly the error after installing the service in MM says, is it still the "OpenService FAILED 5: Access is denied"?
If yes, could you please try this after the error is shown:
- run "cmd" (i.e. command line)
- type "sc start MediaMonkeyService" to the command line
What does it write?
And what does it write if you run "cmd" as administrator and perfrom "sc start MediaMonkeyService"?

Hmm, it means that start of the service works fine via command line even if it is not running as administrator (as expected).

So that is really strange why MM is getting "Access Denied", because MM actually does the same (it calls 'sc start MediaMonkeyService').
In addition you indicated that the service is properly closed by MM on MM start, and properly started by MM on MM closing which is strange, because MM uses the same method to start it (as during install).

I am going to prepare special testing MM.EXE for you that could show us more.

1. Open Local Security Policy app
2. Expand Local Policies, and then click User Rights Assignment
3. In the right pane, right-click Log on as a service, and then click Add User or Group.
4. In the User and Group Names box, type the name that you want to add to the policy, and then click OK. (in my case this was the admin user account I log in with)
5. Quit the Local Security Policy app.

One reboot later, the MediaMonkey service started running with no problems. Hope this might be of help to someone who experiences the same error.

1. Open Local Security Policy app
2. Expand Local Policies, and then click User Rights Assignment
3. In the right pane, right-click Log on as a service, and then click Add User or Group.
4. In the User and Group Names box, type the name that you want to add to the policy, and then click OK. (in my case this was the admin user account I log in with)
5. Quit the Local Security Policy app.

One reboot later, the MediaMonkey service started running with no problems. Hope this might be of help to someone who experiences the same error.

Sorry for reopening this old thread but I had a similar problem (Error 1069: The service did not start due to a logon failure) when trying to install the MediaMonkeyService from inside MMW.

In the end, I found a fix on this old Microsoft support page: https://support.microsoft.com/en-gb/kb/327545
The advice still works for Windows 10:

1. Open Local Security Policy app
2. Expand Local Policies, and then click User Rights Assignment
3. In the right pane, right-click Log on as a service, and then click Add User or Group.
4. In the User and Group Names box, type the name that you want to add to the policy, and then click OK. (in my case this was the admin user account I log in with)
5. Quit the Local Security Policy app.

One reboot later, the MediaMonkey service started running with no problems. Hope this might be of help to someone who experiences the same error.

I just registered to forum to say thank yo a lot. this was worked for me.